Time to rethink the binge?
Each week, senior correspondent Peter Kafka decodes the biggest news in the tech and media worlds. Ideas for a future column? Email kafkaonmedia@recode.net. |
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Happy Wednesday and happy halfway through 2022. I'm celebrating with a little time off, and then have some business travel — remember that? — so the next time you see this column will be in mid-July. Until then, a story about Netflix, told with three charts, made in collaboration with the excellent Rani Molla. If you like what you're reading, please feel free to forward to a friend. And if your friend sent you this and you'd like to get it in your inbox (just about) every Wednesday, head over here to sign up. It's 100 percent free. And if you've got thoughts about what you're reading or what you'd like to read in a future column, I'm all ears. You can @ me on Twitter or send me an email. |
Netflix spends around $17 billion a year on new TV shows and movies. But its newest customers don't think they're getting their money's worth: New data shows that Netflix subscribers are more likely to bail on the subscription service in the first month than are subscribers of any of its streaming competitors. That's a new development, and it syncs with Netflix's stunning news this spring that it lost 200,000 subscribers in the first three months of the year, and expects to lose another 2 million in the second quarter of the year. Those are the first subscriber losses the company has posted in a decade, and the results have led to a huge drop in its stock price, a scramble to find answers, and a fair degree of schadenfreude. The data that suggests what kind of problem Netflix is facing comes to Recode via Antenna, a research service that tracks consumer spending on subscription services. And it shows that by the end of April, 23 percent of Americans who signed up for Netflix had dropped the service within a month. That's more new subscriber cancellations than any other competitive service Antenna tracks — including the likes of Apple TV+ and HBO Max, which used to have higher early churn numbers but have recently improved them. |
But it's certainly worrisome for Netflix, which used to offer subscribers a huge swath of Big Media's best movies and TV shows, because Big Media wasn't paying attention to streaming. That's over now, and some of the best-performing stuff that used to be on Netflix — TV shows like The Office and Friends; movies like Disney's Marvel franchise — are now on competitors' platforms. So Netflix's response includes a move to offer a cheaper version of the service with ads, and an admission that it has to get better at the programming it makes for itself. It also appears to be intentionally backtracking on its initial pledge to let viewers watch an entire season of a show at once. Instead, in the case of a few high-profile shows, like Ozark, it has released the newest season in two chunks, spaced months apart. It's doing the same thing for the new season of Stranger Things: The first seven episodes came out on May 27, but the last two won't come out until this Friday, July 1. That is: If you want to see all of Stranger Things season 4 right away, you need to subscribe to Netflix for at least two months, and likely for three. You can see the logic for that in the chart of Antenna data below, which tracks the churn of video subscribers who have signed up in the last three months. In this one, you can see that Netflix performs in the middle of the pack of its peers, who tend to release one new episode of a hit show every week. If Netflix can hang onto subscribers for a little bit, its relative performance improves. |
A Netflix representative declined to comment on Antenna's data, but pointed me to the company's commentary in its April earnings call, where it acknowledged "slight elevated churn" — but also said that its ability to hang on to customers "remains at a very healthy level." The best news for Netflix, which still has some 220 million subscribers — much more than any competitor — is that the longer someone subscribes to Netflix, the more likely they are to keep subscribing. The company's lifetime churn rate remains better than anyone else — though it has gone up in recent months as well. |
But hanging on to older subscribers won't help Netflix that much if it can't keep its new ones. And it needs new ones to keep investors at bay. Netflix was worth nearly $300 billion last fall; now it's worth $84 billion, and that number could keep falling if Wall Street thinks its growth days are over. There's no single magic bullet for that, and the task may get even tougher if a recession forces consumers to cut back on entertainment spending — and perhaps spend more time watching free entertainment options like TikTok. One of the reasons it's fun to write about Netflix is that everyone's a Netflix expert, because everyone uses Netflix. So: What are you seeing? Are you sticking with Netflix? Have you swapped it out for something else? If you've dropped it, what would you need to come back? Drop me a line at kafkaonmedia@recode.net and let me know. And if you're reading this on a browser but would like to have it delivered to your inbox, free of charge: Good news! Sign up here for piping hot content (almost) every Wednesday. |
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